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GCC Insurance Industry | February 08, 2022

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GCC Insurance Industry | February 08, 2022

Table of Contents

1. EXECUTIVE SUMMARY ............................................................................ 7

1.1 Scope of the Report ..................................................................................... 7

1.2 Industry Outlook ......................................................................................... 7

1.3 Key Growth Drivers ...................................................................................... 7

1.4 Key Challenges ........................................................................................... 8

1.5 Key Trends ................................................................................................. 8

2. THE GCC INSURANCE INDUSTRY OVERVIEW .................................................. 9

2.1 Country-wise Insurance Market Overview ....................................................... 15

3. THE GCC INSURANCE INDUSTRY OUTLOOK ......................................... 34

3.1 Forecasting Methodology ............................................................................. 34

3.2 GCC Insurance Market Forecast .................................................................... 35

3.3 Country-wise Market Size Forecast ................................................................ 38

4. GROWTH DRIVERS ............................................................................... 45

5. CHALLENGES ........................................................................................ 51

6. TRENDS ............................................................................................... 54

7. MERGER AND ACQUISITION (M&A) ACTIVITIES .................................. 57

8. FINANCIAL AND VALUATION ANALYSIS .............................................. 59

8.1 Financial Performance ..................................................................................... 61

8.2 Valuation Analysis .......................................................................................... 70

COUNTRY PROFILES ......................................................................................... 73

COMPANY PROFILES ........................................................................................ 80

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GCC Insurance Industry | February 08, 2022

Glossary

Insurance: A mechanism of contractually shifting burdens of pure risks by pooling them Gross written premium: Total premium written and assumed by an insurer before deductions for reinsurance and ceding commissions for a policy that has already become effective

Insurance penetration:

Gross written premium measured as a percentage of gross domestic product

Insurance density:

Gross written premium measured per capita

Net written premium:

Gross written premium less reinsurance ceded

plus reinsurance assumed

Net Earned Premium:

Total premiums collected over a period that have been earned based on the ratio of the time passed on the p olicies to their effective life Cession rate: The percentage of written premium transferred to a reinsurer by a primary insurer (ceding company)

Retention rate:

The percentage of written premium retained by a primary insurer Net underwriting profit / (loss): Excess/deficit of premium earned after providing for all expenses directly attributable to underwriting activities and excluding investment income Claims ratio: Net claims incurred as a percentage of net earned premium

Expense ratio:

Underwriting and administrative expenses as a percentage of net earned premium Combined ratio: The sum of claims ratio and expense ratio. A combined ratio of less than

100 indicates an underwriting profit

Investment returns: Calculated by dividing gross investment income over investments in securities, affiliates and property Takaful: Follows Islamic religious principles such as bans on interest and pure monetary speculation. Here, risk is pooled among policyholders rather than being borne entirely by the company

Bancassurance:

Involves the distribution of insurance products through the banking channel

Life insurance:

Involves the distribution of insurance products such as whole life insurance and term insurance Health/Medical insurance: Involves the distribution of insurance products covering the insurer for in patient and outpatient medical expenses, maternity, optical and dental treatments, accidental death, disability due to accident or sickness and emergency medical repatriation . Health and Medical insurance can be used interchangeably Property & casualty insurance: Involves the distribution of insurance products covering for loss of or damage to buildings, furniture, plant and machinery, fixtures and fitting, due to fire, explosion, burglary, natural calamities and terrorism, among others Motor insurance: Involves the distribution of insurance products covering for loss of or damage to the insured's vehicle by accidental collision or overturning, fire, theft and while being transported (including the process of loading / unloading), among others

Travel insurance:

Involves the distribution of insurance products covering the insurer during travel period for any medical and hospitalization expenses, loss of cash and baggage, trip cancellation an d repatriation in case of death, serious illness or accident, among others

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GCC Insurance Industry | February 08, 2022

Marine insurance: Involves the distribution of insurance products covering the risks of transit for all types of cargo transported by sea and air freight, land transit, in addition to hull and machinery, excess liabilities risks, loss of hire, protection a nd indemnity risks

Aviation insurance:

Involves the distribution of insurance products covering all risks in the sector such as maintenance, repairs/overhaul liability, hull war, manufacturers hull and liability, loss of license, spares all risks and comp rehensive, aviation third party war liabilities, operators liability and hangar keepers liability Engineering & construction insurance: Involves the distribution of insurance products covering against all risks related to engineering and construction activities such as contractors plant, equipment and machinery, electronic equipment, machinery breakdown, sabotage and terrorism, among others Oil & gas insurance: Involves the distribution of insurance products covering against various risks including onshore and offshore activities, and operational assets for oil & gas entities. Product offerings also include solutions for alternative/renewable energy sectors Workmen's compensation & benefits insurance: Involves the distribution of insurance products covering legal liability of employers to compensate their employees for death, disablement or injury due to an accident at work during the period of employment contract Public & product liability insurance: Involves the distribution of insurance products such as public liability insurance that includes cover against property damage or personal injury caused through business activities, and product liability insurance that includes cover for property damage or bodily injury arising out of a defective product manufactured Third party liability insurance: An insurance policy purchased for protection against the claims of another Fidelity guarantee products: Involves the distribution of insurance products covering common fidelity claims such as employee dishonesty, embezzlement, forgery, robbery, safe burglary, computer fraud and wire transfer fraud, among others Protection & savings insurance: Involves the distribution of insurance products providing covers for children's education expenses, retirement covers, personal protection and family protection plans

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GCC Insurance Industry | February 08, 2022

"The GCC insurance industry is currently going through a challenging time due to multiple reasons, among whic h is the economic downturn across the region. The lower demand for insurance and high competition had an adverse impact on insurance growth. In addition, the delay in the rollout of mandatory health insurance in Oman and Bahrain as well as the potential delay of government infrastructure projects are hinderances to growth. Furthermore, the delay in cash collection related to premium receivables from policyholders as well as the decline in valuation of real estate are challenges for the sector. The COVID-19 pandemic is an unprecedented event for the insurance industry and presented an increasing number of claims. The impact of COVID-19 pandemic has firmly demonstrated the importance of professional qualification to handle such kind of risks. Many insurance c ompanies are anticipating some difficulties in handling COVID-19 claims and the role of loss adjuster has increased substantially. Business interruption claims of 2020 related to COVID-19 which are anticipated to be higher than expected pay-outs in 2021, are expected to further affect earnings. However, a higher awareness of insurance products could increase the demand for insurance in the GCC. Some regulations in the region have enhanced and improved discipline and transparency in the GCC insurance industry. Stricter and effective regulations could accelerate the industry's consolidation. Despite the uncertainty regarding the economic recovery, the insurers in the GCC are likely to benefit from ongoing infrastructure spending, new mandatory coverage and higher insurance demand."

Dr. Abdul Zahra A. Ali Al Turki

CEO, National General Insurance Company (PJSC), UAE "Outlook for the insurance industry is stable and, appears quite resilient given the challenges that the economy has faced firstly with reduced oil prices and secondly with COVID. Regarding the effects that COVID-19 has had on the industry, this varies depending on the profile of each insurer. For example, companies that wrote a significant share of medical business will have witnessed a not insignificant segment of their income reduced as buyers cut benefits and membership due to the economic contraction. Construction companies also faced considerable headwinds due to the economic slowdown along with the tourism and hospitality sectors. However, these are short to medium term issues that will dissipate as each sector recovers to pre-COVID levels. Challenges facing the sector are severe competition amongst each other and the increase in commissions that the Brokers demand due to reduced revenue flows, in particular the motor portfolios. The hardening reinsurance market has also added a further challenge to Insurers in particular where facultative is required. Factors that will aid growth include; further stimulus from federal governments into infrastructure spending given that oil prices have risen and remain at those levels and, increased investment opportunities in particular, increased interest rates from financial institutions. Trends include insurers fast-tracking their digitization strategies."

Ewen John McRobbie

CEO, RAK Insurance, UAE

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GCC Insurance Industry | February 08, 2022

"We believe the GCC insurance industry will continue to grow as the sector has remained resilient amidst the subdued global and economic environment. Growth of the industry is expected to be facilitated by increasing government support, improving regulatory environment and infrastructure development. Rising population and awareness regarding life insurance are expected to improve insurance density and penetration levels in the region. Reopening of the tourism sector and recent announcement of the national health insurance law in Bahrain is likely to bring additional growth for the Country. COVID has had a significant impact on the sector and consequently aggravated the existing issues that were dampening its growth. Slowdown in sectors such as energy, construction, travel and tourism have heavily weighed on private sector activity leading to weak consumer spending. Additionally, insurers are witnessing a fall in Investment returns due to the low interest rate environment, as well as stiff competition which is impacting profitability levels. The pandemic has further emphasized the need for adoption of technology to deliver a consolidated and unified experience. The existing competitive enviro nment has propelled industry players to innovate and scale up their offerings and services, especially adopting digital channels to support day to day activities of their clients. Crowded nature of the market, operational difficulties to cope up with the volume of claims and lower profit margins are triggering consolidations which will improve market dynamics. Going forward these trends will support in achieving greater operational scale and efficiencies within the sector."

Ashraf Bseisu

Group Chief

Executive, Solidarity Group Holding, Bahrain

"The GCC insurance sector has demonstrated resilience since the onset of the pandemic, and we expect the sector to witness a moderate albeit steady growth owing to improving macro- economic conditions, regulatory framework and infrastructure development. A growing population base and continued revenue diversification efforts of the GCC governments will also aid growth of the industry. Ongoing implementation of mandatory insurance lines especially in the health insurance line will provide further boost to the gross written premiums. GCC's life insurance segment remains underpenetrated and therefore presents tremendous growth opportunity for the industry supported by increasing awareness of its benefits especially post the pandemic. The pandemic has also accelerated the process of adopting digital solutions by operators to improve operational efficiencies as well as increase their market penetration. Intensifying competition in recent years has put the sector under pressure and increasing capital requirements, particularly in the UAE and Saudi, are leading to consolidation across the market. Looking comprehensively, signs of an improving economy among the GCC nations, push towards digitization and rise in consolidations are expected to drive growth over the next five years of the insurance industry."

Rohit Walia

Executive Chairman and CEO, Alpen Capital (ME) Ltd.

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GCC Insurance Industry | February 08, 2022

1.

Executive Summary

The GCC insurance industry has witnessed moderate growth in recent years amid macroeconomic concerns and intensifying competition within the industry. The outbreak of COVID-19 since the start of 2020 has also weighed on the growth prospects of the broader industry. Nevertheless, the long-term prospects of the GCC insurance sector remains positive owing to expected economic upheaval, government's diversification efforts, contin ued infrastructural development, regulatory harmonization, push towards digitization, and rising population over the forecasted period. Moreover, reopening of the tourism sector coupled with mega events such as the on-going Expo 2020 and the FIFA World Cup 2022 are also likely to boost growth, going forward.

1.1 Scope of the Report

This report is an update of Alpen Capital's GCC Insurance Industry Report dated November

24, 2019. It focuses on the current state of the insurance industry across the GCC nations,

including recent trends, growth drivers and challenges. The report also provides an outlook of the industry until 2026, along with profiles of prominent insurance providers in the region and a brief analysis of the financial and market valuation metrics.

1.2 Industry Outlook

The GCC insurance market is projected to grow at an annualized rate of 3.2% from US$ 26.5 billion in 2021 to US$ 31.1 billion in 2026.

Sustained increase

in population, economic recovery, reopening of the tourism sector, and strong pipeline of infrastructure development projects are among the leading factors that will facilitate growth in the sector. Moreover, the governments' efforts in strengthening regulations, encouraging innovative tech -enabled services, coupled with introducing mandatory business lines are also likely to aid growth. Within the GCC, Kuwait, Qatar and the UAE are expected to outperform the regional growth with annualized rates of

5.3%, 4.7% and 4.1%, respectively, over

the next five-years. UAE, the largest market in the region, will continue to maintain its leading position and remain the insurance hub of the GCC. The life insurance GWP is projected to grow at a CAGR of 3.8% from US$ 3.8 billion in 2021 to US$ 4.6 billion in 2026 amid rising population and increasing awareness. On the other hand, the non life insurance segment is projecte d to grow at a CAGR of 3.1% from US$ 22.7 billion in 2021 to US$ 26.5 billion in 2026, primarily aided by an expected recovery in economic activity, the roll-out of new mandatory business lines, and rise in infrastructure investments.

1.3 Key Growth Drivers

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